Business Law

When Transferring a Business Enterprise, Is It Possible to Avoid Liability for Pre-Transfer Debts?

According to the definition of “Commercial Enterprise” in paragraph 1 of Article 11 of the Turkish Commercial Code (“TTK”); “A commercial enterprise is an enterprise in which activities are carried out continuously and independently, aiming to generate income exceeding the limit stipulated for the artisan enterprise.” All businesses with the specified elements will now be considered as “commercial enterprises” legally. In practice, the transfer of a commercial enterprise is made with a written transfer agreement, and the assets and liabilities of the enterprise are transferred to the legal or real person who takes over all the assets. In the assets of a commercial enterprise, there are many intangible and tangible elements such as intellectual property rights, buildings, machinery, tools and equipment, tenancy rights, and internet domain names. The subject of the transfer of the commercial enterprise is the determination of which elements the transfer covers when the commercial enterprise is transferred and the transfer of these elements.

How Does the Business Transfer Process Work?
Pursuant to Article 11.3 of T.T.K and Turkish Code of Obligations (“TBK”) Article 202, the transfer of a commercial enterprise is a transaction involving the transfer of the enterprise with its assets and liabilities and with all its elements. In other words, it is not possible to transfer only the assets of the enterprise and exclude its debts from the scope of transfer. Apart from this, the parties can determine the concrete limits of the scope of the transfer with the transfer agreement themselves. Some assets or liabilities may be excluded by the contract, but this limitation must be done in a measured way and the transferred enterprise must maintain its capacity and availability to continue its activities. It should be added that the elements that can be excluded vary according to the type, subject and field of activity of the commercial enterprise. However, in practice, unless the parties agree otherwise, it is accepted that a commercial business transfer transaction covers the business as a whole. In order for the transfer of the commercial enterprise to be valid against the creditors, the transfer must be notified to the creditors by the transferee or announced in the newspapers, as stipulated in Article 202 of the TBK. The aforementioned notice will not affect the validity of the transfer agreement between the parties, but it will be necessary for the transfer agreement to have results in terms of external relations. Therefore, if the transferee does not give such notice to the creditors, transferee will not be liable for the debts.

While the Commercial Enterprise is Transferred, Will the Debts of the Enterprise be Transferred?
In accordance with the provisions of the law, the debts pass to the transferee with the transfer of the enterprise. According to the prevailing opinion, even if the parties have limited the transfer of debt with the transfer agreement they will make among themselves, this limitation will only be valid between the transferor and the transferee, it will not have any effect on the creditors of the transferee business and this limitation cannot be asserted against the creditors.

In addition, T.B.K. In Article 202 and its following, it is regulated that as a result of the transfer of commercial enterprise, the transferor will be jointly and severally liable with the transferee for the debts before the transfer for a period of 2 years. With this provision, the legislator aims to prevent transferors who aim to get rid of their creditors through malicious or collusive transfer transactions. Due to joint liability, creditors have the right to apply to both the new owner and the former owner of the business for a period of 2 years. The debtors, on the other hand, will be able to collect by recourse to the other party for the payments made jointly or unilaterally in accordance with the joint responsibility internal relationship. If no follow-up is initiated by the creditors for 2 years after the transfer due to the 2-year disqualification period introduced in accordance with the law, the only addressee of the receivables based on the pre-transfer period will be the person who has just taken over the business.

When Does the 2-year Liability Period Begin for the Transferor?
The beginning of the liability period starts from the date of notification or announcement of the transfer of the business to the creditors for debts that have become due as of the date of transfer, but from the date of due date for debts that are not due. What is meant by the debt being due is that a debt has come due and becomes payable or demandable. Due date is not clearly regulated in the law, but when a net due date is determined for the debt and this due date is reached, or when the condition is fulfilled in a debt relationship established based on a certain condition, or if the maturity is not determined, the creditors willingness to make a payment together with the establishment of the debt relationship comes to the fore. The principle that the transferor and the transferee of the commercial enterprise continue to be jointly liable for 2 years after the transfer is actually a situation to protect the creditors. Thus, the right of the creditors to apply to the old debtors they know, as well as the opportunity to go to the new debtor they encounter, provides comprehensive protection for the creditors.

In practice, after the transfer of commercial enterprises, various disputes may occur in terms of from whom the debts remaining from the pre-transfer period will be collected and who will be responsible. Along with the transfer of a commercial enterprise, the debts of the enterprise are transferred to the transferee in accordance with the law, but matters such as notifying and announcing this transfer to the creditors are important in order to avoid any disputes about liability in the future. The determination of the starting period of the joint liability of 2 years between the transferor and the transferee of the commercial enterprise and the execution of legal proceedings accordingly are of utmost importance for the parties in dispute.

Yağız Öztim

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